Real property can be owned by one person only, or by two or more co-owners. If you are planning to co-own property with at least one other person, you will need to decide what type of joint tenancy to use. Illinois law allows three different types of joint ownership – tenancy in common, joint tenancy, and tenancy by the entirety. The type of joint ownership you choose and the manner in which you title property can impact several things. The most important of those, for most people, is how each owner’s interest in the property is handled upon death. Does your interest become part of your estate or will it automatically transfer to the other owners? Understanding more about the options for joint tenancy should help you decide which type is right for you.
Tenancy in Common
In the State of Illinois, tenancy in common is the fallback option for co-ownership. If no manner of title is stated, the law will presume that the property is held as tenants in common. When property is held as tenants in common it means that each owner owns an undivided fractional interest in the property. For example, if you own property with one other co-owners, you each one half of the property. If you own property with three other co-owners, you each own one-fourth of the property. It does not mean that the property is physically divided though. It just means that from a legal perspective you own a faction of the interest in the property; however, you have the right to use all of the property.
If you own property as tenancy in common, it also means that you have the right to sell, gift, or encumber your interest in the property without the permission of the other owners. When you die, your interest in the property becomes part of your estate. As such, your interest will be gifted through your Last Will and Testament or through the intestate laws of the State of Illinois.
Joint Tenants with Rights of Survivorship
In order to for two or more people to hold property as joint tenants with rights of survivorship, they must satisfy the “four unities” of ownership. The “four unities” include:
- Time — all tenants must take title at the same time
- Title — all tenants must take title by the same document
- Interest — all tenants must have an equal interest
- Possession — all tenants have an undivided possession right
Like tenancy in common, the owners who hold title as joint tenants with rights of survivorship all own an undivided interest in the property but have the right to use the entire property. The difference is found in how an owner’s interest in the property is handled upon death. If you own property as a tenant with rights of survivorship, your interest in the property will automatically transfer to the remaining owners upon your death instead of becoming part of your estate. As long as property is held as tenants with rights of survivorship there will never be a new owner to the property.
The joint tenancy can be broken, however, if one of the owners conveys his/her interest in the property to someone else. As an owner under joint tenants with rights of survivorship you may sell or gift your interest in the property without the consent of the other owners. If you do that, the remaining owners will continue to hold title as joint tenants with rights of survivorship.
Tenancy by the Entirety
The last option for owning property jointly is tenants by the entirety. Tenants by the entirety is essentially a specialized form of joint tenancy with rights of survivorship that is only available to married couples for their homestead property. Tenancy by the entirety requires the four unities of ownership plus a firth one – marriage. In addition, this type of ownership provides more protection than any other. Like joint tenancy with rights of survivorship, if one if the owners/spouses dies, the decedent’s interest in the property will automatically transfer to the other owner/spouse. In addition, however, this type of joint ownership offers some protection from creditors. For example, a home held as “tenants by the entirety” may only be reached by creditors of joint debts of a husband and wife. In the case of non-joint debts of a husband and wife, the property may not be partitioned, sold, or encumbered without the permission of both spouses. Neither spouse may sell, gift, or encumber his/her interest in the property without the consent of the other owner when property is held as tenancy by the entirety.
If you have questions or concerns regarding joint tenancy, contact the experienced Illinois estate planning attorneys at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.